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Thursday, 14 May 2009

Kuwait's Global Investment House, the country's biggest investment bank, said on Thursday it made a first quarter net loss of KD69.5 million ($239.9 million), mainly on investment losses.

Global, which defaulted on most of its debt earlier this year, is among the most prominent firms in the Gulf Arab state's financial sector to face serious problems amid tight credit conditions.

The loss is a relative improvement after a KD360.5 million loss it posted in the fourth quarter last year. Global made net profit of KD34.7 million in the first quarter of 2008, it said in a statement on Thursday.

European investors have mothballed plans to invest in Dubai's bombed-out property in favour of more familiar and mature markets, prolonging the emirate's maiden bust until at least 2011.

Prices in the emirate's once-booming real estate sector will continue to slump over the next year, with demand for property waning as expat professionals lose their jobs, while more Dubai contractors will bid for projects elsewhere.

Once a magnet for capital from European property investors, the emirate's appeal -- famed for its iconic palm tree-shaped islands -- is fading fast as they scramble to seize better real estate deals closer to home and elsewhere in the Gulf.

A Dutch businessman has been sentenced to three years in prison and ordered to pay a fine of Dh300,000 after being found guilty of laundering nearly Dh60 million.

The Dubai Court of Misdemeanours found the 39-year-old businessman, A.K., guilty of laundering between Dh50 million and Dh60 million - proceeds from drug, theft and sex crimes - as charged by the Public Prosecution.

The court also fined M.A, a 44-year-old Jordanian woman, a banker, Dh100,000 for aiding and abetting A.K's crime.

The Dubai Gold Securities (DGS) have found most of their buyers from institutional investors in the region, senior officials involved in the region’s first Shariah compliant exchange traded fund (ETF) said.

Investment arms of HSBC and Mashreq besides investment banks like Shuaa Capital and other asset managers account for a good chunk of DGS traded so far.

“On the back of increased risk in markets, institutional investors are seeking to increase exposure to gold as an asset class within their portfolio. Institutional demand for the product has been particularly high,” said Sameer Meralli, Director (Marketing) of Dubai Commodities and Asset Management (DCAM).

Two private equity groups, Kohlberg Kravis Roberts (KKR) and Citadel Capital, plan to increase their investments in the Middle East as they seek to profit from what they say are attractive asset valuations created by the global financial crisis.

KKR, a US firm that is a global player in private equity and specialises in leveraged buyouts, intends to establish partnerships with financial institutions across the Gulf after opening an office in Dubai. KKR’s Middle East unit said this week it received a licence to operate in the Dubai International Financial Centre (DIFC), which will be its regional hub.

Makram Azar, the managing director of KKR MENA, said: “We plan to partner up with local institutions and our objective is to deal with the top players in each country, not only the main private equity players, but also big corporates and big families, as well as sovereign wealth funds.

Majid Al Futtaim Asset Management has launched its first MENA equity fund with US$150 million(Dh550) of its own capital. The fund will invest in listed securities in the region’s defensive sectors including telecommunications and pharmaceuticals.

“Launching an asset management business during such economic uncertainty is a challenge but investors still need to find a home for money in both good and bad times; we’ve found that in such market conditions, the market is hungry for fund managers who can manage risk,” said Iyad Malas, the chief executive of MAF Asset Management, a unit of the Majid Al Futtaim retail group.

Dubai's Emirates airline expects the air cargo industry to reach its trough by the end of May, its cargo head told Reuters on Wednesday.

"We are going to see some more pain in the next 3-4 months. But by the end of this month, we will have seen the worst," said Ram Menen, divisional senior vice president cargo at Emirates.

Emirates, among the world's 10 biggest cargo carriers, posted annual sales of $6.5 billion in its fiscal year ended March 31, 2008. It has not yet published figures for the fiscal year that ended on March 31 this year.

The United States said on Wednesday it was very concerned by video of a member of the ruling family of Abu Dhabi allegedly torturing an Afghan man, footage that could stall a civilian nuclear deal with the United Arab Emirates.

State Department spokesman Ian Kelly said the department was consulting with Congress about the agreement, which could be blocked if an outcry over the video grows. The deal could be worth billions of dollars to U.S. energy companies that build and operate nuclear power plants.

"We, of course, are very concerned by this video," Kelly told reporters when asked whether the 2004 torture video was holding up implementation of the agreement, which was signed in the final days of the former Bush administration and has to be sent to Congress for review by President Barack Obama.

Spring has been good to the Gulf’s equity markets. Over the past three months, all bourses have risen by at least double digits, and all but Kuwait, Bahrain and Qatar have now returned to a positive year-to-date performance.

Global markets have also rallied, but fund managers in the region say there have been many local catalysts to spur renewed optimism. Oil prices have recovered somewhat, they say, governments are continuing to apply economic remedies, and first-quarter earnings have largely been heartening.

Morgan Stanley, the investment bank, has recommended that investors increase their exposure to Arab stock markets, arguing that “despite a sharp cyclical contraction in growth this year due to falling oil revenues, we think the region will be one of the more resilient to the global downturn”.

Oil prices have dropped from $147 a barrel to between $50 and $60 over the past year, leading to a collapse of export revenues for Middle Eastern and North African oil producers.

Foreign investment, remittances, and tourism receipts will be affected throughout the region. Yet growth – although slowing – remains higher than in many regions, including Latin America and eastern Europe. This year, the oil exporters of the Middle East and North Africa will see their non-oil gross domestic product – a good measure of local economic conditions that directly affect their population – expand at more than 3.5 per cent. Real GDP in the region’s diverse group of oil-importing emerging markets and developing countries should also grow at about the same rate.

To be sure, this represents a slowdown from the near 6 per cent growth rates of recent years, but in terms of the magnitude of the slowdown, as well as the level of growth, the Middle East and North Africa is slated to be the best performing region after developing Asia this year. What explains this resilience?

The global economic slowdown could ignite a new jobs crisis in the Middle East as demographic pressures reach all-time highs, placing unprecedented strain on the region’s labour markets, a new report says.

The report by the Middle East Youth Initiative says that in spite of the recent oil boom youth unemployment levels in the Middle East have remained the highest among developing regions, with the aggregate unemployment rate for 15 to 24-year-olds at nearly 25 per cent, compared with a world average of 14 per cent.

It adds that education systems – which have long been in dire need of reform – have continued to be unsuccessful in preparing young workings for competitive labour markets, while warning that the downturn could set back much-needed back labour reforms.

The extreme temperatures and shallow waters of the Caspian Sea combine to create a harsh operating environment. However, Kazakhstan’s Kashagan oilfield is providing a bountiful source of revenue for Renaissance Services, a small but ambitious Omani offshore services company.

Renaissance is servicing the offshore Kashagan development – one of the world’s largest hydrocarbon projects – with almost 50 of its specialised support vessels and barges. Lucrative contracts in Kazakhstan and nearby Azerbaijan are allowing Renaissance to breathe easier than many Gulf companies amid the fierce economic headwinds.

The company’s main business remains in Oman, where it also has a large engineering division which repairs and manufactures energy industry components, among other businesses.